A week ago, it was only Esther George, the Kansas City Federal Reserve Bank President, as the lone dissenter at the Open Market Committee's March meeting. For the second time in a row she voted against the continuation of the Fed's $85 billion monthly bond purchasing policy, citing concerns that such "aggressive stimulus could heighten the risk of inflation and financial instability."
Since then, the president of the Federal Reserve Bank of New York William Dudley has also touched upon this theme of "tapering" the bond buys, as have the non-voting presidents from Dallas and Philadelphia in recent speeches.
Maybe this trio sees something or wants to send a message.
"I'm not criticizing the Fed for the position they've taken and the policy implementation they have taken," says Peter Kenny, managing director at Knight Capital Group, in the attached video. "But the bottom line is because of quantitative easing, and because the dollar is the world's reserve currency, it does have an impact."
While monthly headline inflation data continues to come in below the Fed's 2% target, Kenny and many other market watchers see it showing up elsewhere "in everything we assume is a part of our daily life."
Those items include the classic data carve-outs of food and fuel, as well as in commodities, and even in things like farm land - despite ongoing drought conditions.
By his math, the cost of Q-E, at least as it pertains to crude oil, is pushing up the price by about 50%, instead of the $65 a barrel level where he thinks current supply and demand metrics imply that it really should be. But since the Fed is actively (and justifiably) putting more dollars into the economy, he says that has resulted in "more dollars chasing that fuel," which of course leads to higher prices.
Fed Chairman Ben Bernanke may not say so, but Kenny argues that "the stock market is another case in point" of ongoing intervention.
"The soft bid we see in equity markets and that we run into every time there's sell-off, that soft bid is the direct result of quantitative easing," he says, acknowledging that some of the recent move higher is also the result of money coming out of bonds and into stocks, as well as cheap valuations.
But whether it's food, fuel, farmland or even shares of Ford (F) that are being impacted, the open-ended question remains; can Bernanke shrink the balance sheet, halt the stimulus, and normalize interest rates without crashing the ship?
When asked if he is confident that Bernanke will succeed at pulling off this monetary miracle on the back nine, Kenny tellingly answers, "I'm very hopeful."